It's not just about Alberta: Oilsands generate thousands of jobs, billions in taxes across continent

Canadian Energy Research Institute

Economic Impacts of New Oil Sands
Projects in Alberta (2010-‐2035)

Afshin Honarvar
Jon Rozhon
Dinara Millington
Thorn Walden
Carlos A. Murillo
Zoey Walden

Study No. 124

May 2011

ECONOMIC IMPACTS OF NEW OIL SANDS
PROJECTS IN ALBERTA (2010-‐2035)

Economic Impacts of New Oil Sands Projects in Alberta (2010-‐2035)

Copyright © Canadian Energy Research Institute, 2011
Sections of this study may be reproduced in magazines and newspapers with acknowledgement
to the Canadian Energy Research Institute

Study No. 124
ISBN 1-‐896091-‐99-‐7

Authors: Afshin Honarvar
Jon Rozhon
Dinara Millington
Thorn Walden
Carlos A. Murillo
Zoey Walden

Acknowledgements: The authors of this report would like to extend their thanks and gratitude
to everyone involved in the production and editing of the material, including, but not limited to
Peter Howard and Megan Murphy

CANADIAN ENERGY RESEARCH INSITTUTE
150, 3512 33 Street NW
Calgary, Alberta T2L 2A6
Canada
www.ceri.ca

May 2011
Printed in Canada

Economic Impacts of New Oil Sands Projects in Alberta (2010-‐2035) iii

Table of Contents

LIST OF FIGURES .............................................................................................................................. v
LIST OF TABLES ...............................................................................................................................
. vii
EXECUTIVE SUMMARY .................................................................................................................... ix
Introduction ....................................................................................................................................... ix
Background ........................................................................................................................................ ix
Study Objective .................................................................................................................................. ix
Methodology...................................................................................................................................... x
Estimated Impacts ............................................................................................................................. x
A Note About Economic Terms .......................................................................................................... xiii
CHAPTER 1 OIL SANDS PROJECTIONS REALISTIC SCENARIO .................................................... 1
Overview ............................................................................................................................................ 1
CERI Oil Sands Projections Realistic Scenario .................................................................................
. 2
Summary ............................................................................................................................................ 8
CHAPTER 2 IMPACT OF NEW OIL SANDS PROJECTS ON US AND CANADIAN ECONOMIES .......... 9
Introduction ....................................................................................................................................... 9
Economic Impacts in Canada ............................................................................................................. 9
Job Creation Perspective.................................................................................................................... 16
Overall Tax Perspective ...................................................................................................................... 22
Oil Sands Royalty from New Projects ................................................................................................
. 26
US Economic Impacts ......................................................................................................................... 29
CHAPTER 3 INPUT-‐OUTPUT METHODOLOGY ............................................................................. 41
What is an Economic Input-‐Output Model? ...................................................................................... 41
Impact Analysis Modeling .................................................................................................................. 42
-‐Canada Multi-‐Regional I/O Model (UCMRIO 2.0) .............................................................. 45
Building the Model ............................................................................................................................. 46
Industries in the UCMRIO 2.0............................................................................................................. 47
US-‐Canada Trade Table and Model Structure ................................................................................... 49
Disaggregation of National Results for the US ................................................................................... 52
Interpretation of the US Impacts ....................................................................................................... 53
UCMRIO 2.0 Multipliers ..................................................................................................................... 54
Data Sources ...................................................................................................................................... 55
Assumptions and Limitations ............................................................................................................. 56
CHAPTER 4 CONCLUSIONS ......................................................................................................... 59
APPENDIX A IMPACTS ON THE US ECONOMY I/O REFERENCE AND
UPPER-‐BOUND SCENARIOS ..................................................................................... 61
APPENDIX B GLOSSARY OF TERMS .............................................................................................. 67
BIBLIOGRAPHY ................................................................................................................................ 71

May 2011

iv Canadian Energy Research Institute

May 2011

Economic Impacts of New Oil Sands Projects in Alberta (2010-‐2035) v

List of Figures

Figure E.1 Jobs Created and Preserved in Canada 2010, 2035 ......................................................... xi
Figure E.2 Multipliers for Canada with Respect to a One Million Dollar Initial Outlay ..................... xii
Figure E.3 Jobs Created and Preserved in the US, 2010-‐2035 .......................................................... xiii
Figure 1.1 ................................................................................................. 1
Figure 1.2 Capacity and Production of Bitumen, 2010-‐2035 Realistic Scenario ............................ 3
Figure 1.3 Bitumen Production Projections by Extraction Type ....................................................... 4
Figure 1.4 Initial and Sustaining Capital (2010-‐2035) ....................................................................... 5
Figure 1.5 Sustaining Capital (2010-‐2035) ........................................................................................ 6
Figure 1.6 Natural Gas Requirements and Greenhouse Gas Emissions ............................................ 7
Figure 1.7 Annual and Cumulative Royalties Collected by the Alberta Government
Existing vs. New Oil Sands Projects, 2010-‐2035 ............................................................... 8
Figure 2.1
Canadian Provinces and Territories ................................................................................. 13
Figure 2.2 Multipliers for Canada with Respect to a One Million Dollar Initial Outlay ..................... 15
Figure 2.3 Canadian Employment per Million Dollar Investment and
Operation in the Alberta Oil Sands Industry .................................................................... 15
Figure 2.4 Percentage of Jobs by Component and Region, 2010-‐2035 ............................................ 17
Figure 2.5 Jobs Created and Preserved in Canada, 2010-‐2035 ......................................................... 18
Figure 2.6 Oil Sands Industry Multipliers on Job Creation by Component and Region .................... 22
Figure 2.7 Tax Receipts by Province and Type .................................................................................. 25
Figure 2.8 Tax Receipts by Source and Region .................................................................................. 26
Figure 2.9 Royalty Income from New Oil Sands Projects, 2010-‐2035 ............................................... 27
Figure 2.10 Jobs Created and Preserved in the US, 2010-‐2035 .......................................................... 38
Figure 2.11
State by State Over 25 Years ............................................................................................ 39
Figure 2.12 Impact of New Operations in Alberta Oil Sands Projects,
State by State Over 25 Years ............................................................................................ 40
Figure 3.1 Overall Bi-‐National Multi-‐Regional I/O Modeling Approach ............................................ 44
Figure 3.2 Schematic of the Input-‐Output System ............................................................................ 56

May 2011

vi Canadian Energy Research Institute

May 2011

Economic Impacts of New Oil Sands Projects in Alberta (2010-‐2035) vii

List of Tables

Table 1.1 In-‐Place Volumes and Established Reserves of Crude Bitumen in Alberta ...................... 2
Table 1.2 Realistic Scenario Delays .................................................................................................. 3
Table 2.1 Economic Impact of Oil Sands in Alberta, 2010-‐2035 Investments and Operation ...... 10
Table 2.2 Economic Impact of Oil Sands in Alberta, 2010-‐2035 Investments .............................. 11
Table 2.3 Economic Impact of Oil Sands in Alberta, 2010-‐2035 Operations ................................ 12
Table 2.4 Economic Input/Output Multipliers with Respect to Initial Outlay
Investments and Operations ............................................................................................ 14
Table 2.5 Jobs as a Result of New Oil Sands Projects in Alberta, 2010-‐2035
Table 2.6 Jobs Created and Preserved in Canada, 2010-‐2035 ......................................................... 19
Table 2.7 Jobs as a Result of New Oil Sands Projects in Alberta, 2010-‐2035 Investments ........... 20
Table 2.8 Jobs as a Result of New Oil Sands Projects in Alberta, 2010-‐2035 Operations ............. 20
Table 2.9 Job Multipliers with Respect to Initial Outlay, 2010-‐2035
Table 2.10 Tax Receipts as a Result of Alberta Oil Sands Investment and Operation,
2010-‐2035, Federal and Provincial-‐Municipal ................................................................. 23
2010-‐2035, Federal .......................................................................................................... 24
2010-‐2035, Provincial-‐Municipal ..................................................................................... 24
Table 2.13 Tax Receipt Multipliers with Respect to Initial Outlay
Federal and Provincial-‐Municipal ..................................................................................... 25
Table 2.14 Royalty Income by Type and Year .................................................................................... 27
Table 2.15 US Output and GDP Impacts National ........................................................................... 30
Table 2.16 US Employment Impact National .................................................................................. 30
Table 2.17 Top 10 States by GSP Impact ........................................................................................... 31
Table 2.18 Total Economic Impact of Alberta Oil Sands in the US by State
2010-‐2035 Plausible Scenario ....................................................................................... 32
Table 2.19 Total Economic Impact of Alberta Oil Sands by US Economic
Region Plausible Scenario .............................................................................................. 33
Table 2.20 Total Economic Impact of Alberta Oil Sands by US PADD Plausible Scenario ............... 34
Table 2.21 Gross State Product (GSP) by State by Year Plausible Scenario .................................... 35
Table 2.22 Jobs Created and Preserved Plausible Scenario ............................................................ 37
Table 3.1 Sectors/Commodities in CERI US-‐Canada Multi-‐Regional I/O Model .............................. 47
Table 3.2 Oil and Gas I/O Multipliers for Canada and the US .......................................................... 54
Table A.1 Total Economic Impact of Alberta Oil Sands in the US by State
2010-‐2035 I/O Reference Case ...................................................................................... 63
Table A.2 Total Economic Impact of Alberta Oil Sands in the US by State
2010-‐2035 Upper Bound Scenario ................................................................................. 64
Table A.3 Total Economic Impact of Alberta Oil Sands by US Economic Region
I/O Reference Case ........................................................................................................... 65
Table A.4 Total Economic Impact of Alberta Oil Sands by US Economic Region
Upper Bound Scenario ...................................................................................................... 65
Table A.5 Total Economic Impact of Alberta Oil Sands by US PADD
I/O Reference Case ........................................................................................................... 66
Table A.6 Total Economic Impact of Alberta Oil Sands by US PADD
Upper Bound Scenario ...................................................................................................... 66

May 2011

viii Canadian Energy Research Institute

May 2011

Economic Impacts of New Oil Sands Projects in Alberta (2010-‐2035) ix

Executive Summary
Introduction

view to advancing energy security and prosperity in North America. This development has slowed
during times of recession and low oil prices, but it has never halted completely, indicating that energy
security and prosperity are realizable goals. This report provides strategic insights by examining the
impacts the oil sands industry has made on North American economies and how the industry will likely
deve impact on Canadian
provincial and national economies, ipple effects on US state and federal economies.
With a sophisticated, comprehensive Input-‐Output (I/O) model, we address the economic opportunities

projections of oil sands initial capital investment, sustaining capital, and operating capital on an annual
basis over the period 2010-‐2035. Chapter 2 explores the potential impact of new oil sands projects on
these economies; not only does this chapter look at the potential monetary impact on these economies,
it also considers the extent that employment will be created. Chapter 3 follows with an explanation of
the input-‐output methodology that CERI has developed to analyze oil sands economics.

Background
1.7 million
conventional oil production and contributing significantly to its gross domestic product. Almost all of
goes to refineries in Canada and the United States, and
the United States now imports twice as much oil from Canada as from any other country. The oil sands
are making an increasing contribution to the close energy ties between Canada and the United States.

Within this report, input-‐output analysis is employed to quantify total economic impacts direct,
indirect and induced of oil sands investment and production on various industries in Canada and the
United States, and on various provinces, territories, and states. Direct impacts are those arising from
spending on goods, services, and labour, and all of them occur within Alberta. Indirect impacts are
those felt by suppliers of goods and services to oil sands construction and operations, their suppliers,
etc. Induced impacts arise from the spending and re-‐spending of personal income derived from
employment created by the direct, indirect, and also the induced impacts themselves.

Study Objective
The objective of this report is to evaluate the economic impa oil sands projects in terms
of GDP, employment, employee compensation, and government revenues.

May 2011

x Canadian Energy Research Institute

Methodology
CERI employs a multiregional Input Output (I/O) model to evaluate the economic impact of
and Canadian economies. The new model is the US-‐
Canada Multi-‐Regional I/O Model (UCMRIO 2.0) and is based on StatsCan)
(USBEA) I/O tables for 2006.
The new CERI I/O model (UCMRIO 2.0) generates multipliers consistent with Statistics Canada
both at the provincial and international level, and it includes induced impacts. Also, the model is
capable of estimating US impacts at the state level; the estimates are consistent with the US
nd the commonly used I/O software IMPLAN.
A two-‐step approach is taken to evaluate the economic impacts. First, future investments and
this is reported separately under the
1
Realistic Scenario. Second, impacts are evaluated using the projections from the first step.
The impacts are estimated separately for the investment and operation phases of the oil sands
projects.
The impacts reported in this document are the effects of additional activity (new projects).
These figures should not be interpreted as the total contribution of the oil sands industry in the
economy.
There are uncertainties regarding the impacts on the US, therefore a range of estimates is
provided. The range includes the I/O Reference Case, Upper Bound Scenario, and the Plausible
Scenario. In the report, results from the Plausible Scenario, which provide a mean for the other
two scenarios, are discussed. Results of the other two scenarios are presented in Appendix A.

Estimated Impacts
The estimated investments, reinvestments, and revenues from operation of the new oil sands
projects are approximately $2,077 billion (2010 $Cdn)2 during the period 2010-‐2035. This is also
$253 billion is considered strategic initial capital for
construction and $1,824 billion for operation, maintenance and sustaining capital.
Total GDP impact of oil sands investment and operations over a 25-‐year period is estimated to
be $2,106 billion for Canada, and $521 billion for the US. Impacts on economies outside of
Canada and the United States are not considered.
Employment in Canada (direct, indirect, induced) as a result of new oil sands investments is
expected to grow from 75,000 jobs in 2010 to 905,000 jobs in 2035. This type of employment
includes new and preserved jobs and also consists of full-‐time and part-‐time jobs (Figure E.1).

1
(2010-‐ May 2011.
2
Unless otherwise stated, all values are in Canadian dollars.

May 2011

Economic Impacts of New Oil Sands Projects in Alberta (2010-‐2035) xi

Figure E.1
Jobs Created and Preserved in Canada, 2010-‐2035
(x 1,000)

1000
900 Supported Employment
800
Thousand Person Years

700
600
500
400
300
200
100
0
2010 2015 2020 2025 2030 2035

Based on the combined impact analysis of Canada and the US, 76 percent of the total GDP
impact occurs in Alberta, 4 percent occurs in other provinces and territories, and 20 percent
occurs in the United States (based on the Plausible Scenario).
Total operations impacts by all three measures (direct, indirect, and induced) are larger than
investment impacts, although on an annual basis the investment impacts are large, being
concentrated in a much shorter period of time. The impacts of investment are less
geographically concentrated than those of operations, reflecting the prominence of outlays on

and the sizeable outlays on Alberta-‐supplied inputs, such as natural gas, during the operating
phase. Total GDP impacts for the investment and operation phases in Canada are $231 billion
and $1,875 billion, respectively.
Dividing total impacts by the corresponding oil sands investment or gross output in millions of
dollars produces the provincial and territorial multipliers. For instance a one million dollar
investment in the Alberta oil sands industry creates $0.96 million dollars of GDP and 4.8 person
years of employment in Alberta.
For every two jobs created in Canada, one job will be created in the US (investment and
operation phases combined).
Canadian national multipliers are shown in Figure E.2. A tax multiplier is added to capture
estimated tax revenue impacts accruing to all levels of government from income taxes, sales
taxes, property taxes, CPP/EI contributions, customs duties, etc. Note, however, that Crown oil
sands royalties payable to the Government of Alberta are not included in tax revenue impacts.
l impact over the period 2010-‐35 is $311
billion. $105 billion. In addition to this amount, the
Alberta government also receives $350 billion of oil sands royalties for a total of $455 billion.
Note that this comparison is highly sensitive to the assumed oil price forecast.

May 2011

xii Canadian Energy Research Institute

For 1 direct job created in Alberta, about 1 indirect job and 1 induced job will be created in the
rest of Canada.

Figure E.2
Multipliers for Canada with Respect to a One Million Dollar Initial Outlay
2.0
1.8
1.6
1.4
1.2
1.0
Millions

0.8
0.6
0.4
0.2
0.0
Output GDP Income and Wages TAX

By 2023, projected royalty revenue from new oil sands projects will be approximately $10.3
billion. By 2035, the total royalty revenue from new projects will be about $36 billion, which
equals the total forecasted Alberta government revenue in 2010-‐11.3
A one million dollar change in final demand, in terms of investment or final consumption,
generates $1.01 and $0.26 million of GDP in Canada and the US, respectively.
The states
operation phases of the oil sands projects. States like California, Illinois, Texas, and New York,
with big economies and large manufacturing sectors, receive the most benefit from oil sands
projects in the investment phase.
States like Illinois, Texas, Wisconsin, Washington, Ohio, Michigan, and Pennsylvania which are
closely involved with Canadian oil sands trade, refining, services incidental to refining, and
storage or transportation of oil sands
industry at the operations phase.
Total GDP impact of oil sands investment and operations over a 25-‐year period is estimated to
be $521 billion for the US.
Employment in the United States (direct, indirect, induced) as a result of new oil sands
investments is expected to grow from 21,000 jobs in 2010 to 465,000 jobs in 2035. This type of
employment includes new and preserved jobs and also consists of full-‐time and part-‐time jobs
(Figure E.3).

3
Government of Alberta Fiscal Update 2010-‐2011, February 2011. http://www.finance.alberta.ca/publications/budget/
quarterly/2010_3rdq/report.pdf

May 2011

Economic Impacts of New Oil Sands Projects in Alberta (2010-‐2035) xiii

Figure E.3
Jobs Created and Preserved in the US, 2010-‐2035
(x 1,000)

500
450 Supported Employment
400
350
300
250
200
150
100
50
0
2010 2015 2020 2025 2030 2035

A Note about Economic Terms
There are a number of specialized economic terms within this study that bear a short explanation.

Economic effects/impacts

Direct effects/impacts These are the employment and financial effects immediately
associated with the development of new projects in the oil sands industry. All direct effects are
allocated within the province of Alberta.
Indirect effects/impacts These are the employment and financial effects on industries that
supply goods and services for the development of new oil sands projects.
Induced effects/impacts These are the employment and financial effects that occur in a region
due to the economic activity in a particular sector. For example, an oil sands project worker will
spend money in the economy by purchasing meals, clothes, and other various goods and
services. Therefore, monies are spent and jobs are created in industries that are peripheral to
the oil sands industry, and these are induced effects.
Total economic effects/impacts This is the sum of all impacts. Direct + Indirect + Induced =
Total
Employment (Thousand Person Years): Thousands of jobs created and preserved every year.
For instance if a new oil sands in situ project with a capacity of 10,000 bbl/day starts operation
by hiring 60 people in the initial year, the employment is 0.06 thousand person years in the first
year. If this new oil sands facility adds 5,000 bbl/day capacity in the second year and hires 25
more employees to operate the new facility, in the second year the In-‐situ project has created
and preserved 0.085 thousand person years of employment. Of the 0.085 thousand person
years of employment, 0.06 represents preserved jobs and 0.025 refers to new jobs.

May 2011

xiv Canadian Energy Research Institute

Job Thousand person years and jobs are used interchangeably throughout this report.
Thousand person years is the unit for the number of people employed in a job for the year. A
job is an occupation that one needs to do in order to be employed. This should not be confused
with stating that a job is a position that one is hired into (i.e., as a plumber). For example, a
company could hire 10 people in a year for the position as manager and not hire any managers
for later years. For the first year, the total amount of positions was 10 and the total amount of
person years for that year is 10. However, for the second year, the total amount of manager
positions is still 10 but the person years are now 20 as 10 people have now worked for 2 years.
While the definition of job and work may be subject to interpretation, for the purposes of this
report the number 10,000 jobs and 10 thousand person years both denote that 10,000 people
were employed for a year.
I/O model -‐ an input-‐output model demonstrates the interdependencies between different
areas of a national economy or between areas of different economies. The CERI I/O model
(UCMRIO 2.0) takes into account interdependencies between Canadian provincial and federal
economies as well as US state and federal economies.
Multiplier This term refers to proportion. For example, if a $1 million increase in oil sands
investment creates 5.6 jobs in Canada, the multiplier is 5.6 (as shown in Table 2.4 in the report).

May 2011

Economic Impacts of New Oil Sands Projects in Alberta (2010-‐2035) 1

Chapter 1
Oil Sands Projections Realistic Scenario
Overview
The oil sands resources that exist in Alberta are contained within three areas (Peace River, Athabasca,
and Cold Lake), as designated by the Government of Alberta, and illustrated in Figure 1.1. Eventually, the
development of the resource will extend into the neighbouring province of Saskatchewan. The
development of the oil sands in both provinces, no matter how transparent, will be carefully monitored
by provincial and federal as well as international governments and environmental activists.

Figure 1.1
Alb

Together these regions cover an area over 14.5 million hectares (ha), with the remaining established
reserves comprising 169.9 billion barrels of an extremely heavy crude oil, referred to as bitumen.1
Approximately 16 percent of the 169.9 billion barrels is currently under active development.

1
The initial volume-‐in-‐place of bitumen has been estimated by the Alberta Energy Resources Conservation Board (ERCB) and is
used to estimate the initial established reserves of bitumen bitumen that is estimated to be recoverable given current
technology and knowledge. (While the ERCB made significant changes to the in-‐place resource in 2009, there are no changes to
the estimate of the initial established reserves of crude bi
are used throughout this report as our estimates for the resource size.) Source: Alberta Energy Resources Conservation Board.
2010-‐ 2010.

May 2011

2 Canadian Energy Research Institute

Of the recoverable bitumen remaining, 80 percent is estimated to be recoverable using in situ methods
which target deposits that are too deep for mining. The remaining recoverable bitumen is anticipated to
be recoverable using mining techniques. Table 1.1 provides a breakdown of the initial volume-‐in-‐place,
initial established reserves, cumulative production, and remaining established reserves, to help further
illustrate the vast potential in the area.

Table 1.1
In-‐Place Volumes and Established Reserves of Crude Bitumen in Alberta (10^9 barrels)

Initial Initial Remaining
Recovery Volume-in- Established Cumulative Established
Method Place Reserves Production Reserves
Total 1,802.7 176.7 6.9 169.8
Mining 130.8 38.7 4.5 34.2
In situ 1,671.9 138.0 2.4 135.5

Source: ERCB, -‐ 2010.

CERI Oil Sands Projections Realistic Scenario
The
Sands Supply Costs and Development Projects (2010-‐ oil sands
report extends for thirty five years, from the end of 2010 to the end of 2044 and presents the results for
three plausible scenarios. However, the projections are only presented to 2035 in this report in order
Realistic Scenario to be consistent with other results presented in this report.

Realistic Scenario assumes that developed nations continue to recover from the recession and
experience modest economic growth in 2011, bringing about a slow and steady growth in the demand
for crude oil. The growth is tempered somewhat by geopolitical concerns in the Middle East and
economic setbacks in some European nations. In this scenario, oil prices begin a slow and steady climb,
thus sending a signal to oil sands proponents that the demand for crude oil is picking up and a period of
ongoing growth for the foreseeable future will ensue.

is based on the summation of
all announced projects, with a wide variety of assumptions pertaining to project schedules and delays,
technology, and state of development. The method by which projects are delayed, or the rate at which

various oil sands projects.

Projects further along the regulatory process are given shorter delays, and have higher probabilities of
proceeding to their announced production capacity. Projects that have been announced, but have not
yet entered the regulatory process with a disclosure document; receive lower probabilities of
proceeding and longer delays. Projects that are suspended are assumed to be already approved but not
yet constructed. Table 1.2 describes the project delays for the Realistic Scenario.

May 2011


Table 1.2
Realistic Scenario Delays
Realistic Scenario
In Situ Mining Upgrading
Probability Delay Probability Delay Probability Delay
Fraction Years Fraction Years Fraction Years
Onstream 1.00 0 1.00 0 1.00 0
Under Construction 1.00 1 1.00 1 1.00 1
Suspended 0.90 3 0.90 3 0.90 3
Approved 0.90 4 0.90 4 0.90 4
Awaiting Approval 0.85 8 0.85 8 0.85 8
Announced 0.70 12 0.65 14 0.70 12
Cancelled 1.00 0 1.00 0 1.00 0

The more reasonable path for oil sands dev Realistic Scenario, where oil sands
development is slow to rebound. It is not until 2016 that the oil sands industry experiences its first spike
in bitumen capacity. Following this spike is a period of relatively steady capacity growth from 2018 to
2035. In 2016, capacity reaches 2.7 MMBPD, and by the end of 2035 capacity increases to 5.4 MMBPD
(see Figure 1.2).

Figure 1.2
Capacity and Production of Bitumen 2010-‐2035 Realistic Scenario

10^3 bpd
6,000

5,000

4,000

3,000

2,000

1,000

0
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034
Total Capacity -‐ Realistic Scenario
Total Production -‐ Realistic Scenario

May 2011


Illustrated in Figure 1.2 is the production profile as well as capacity volume. By 2035 production volume
will reach 4.9 MMBPD under the Realistic Scenario. Production is projected to reach 2.1 MMBPD by
2015, and 4.8 MMBPD by 2030.

Production projections by extraction type are presented in Figure 1.3. Mined bitumen maintains a
majority status of oil sands volumes until 2025, when in situ production volumes overtake mined
bitumen. By the end of the projection period, in situ bitumen accounts for 57 percent of total
production volumes, or 2.8 MMBPD, as compared to mined bitumen which produces 2.1 MMBPD.

Figure 1.3
Bitumen Production Projections by Extraction Type

10^3 bpd
3,000

2,500

2,000

1,500

1,000

500

0
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034
Mined Bitumen In situ Bitumen

The Realistic Scenario is in line with expectations for pipeline capacity additions, and it is possible that
the labour and capital markets in Alberta will be capable of handling this expansion without causing
undue stress on the local economy. The period of sustained growth (2018 to 2034) will introduce
challenges to the Alberta economy similar to those faced during the 2004 to 2008 period.

Achieving any of the levels of production requires a substantial number of inputs, of which capital (both
strategic and sustaining) and natural gas are critical. Without the required capital, an oil sands project
cannot be constructed. The project, with current technologies, cannot operate without an abundant and
affordable supply of natural gas. And lastly, once the facility is operating there is an ongoing need for
sustaining capital to ensure that production volumes stay at their design capacities.

May 2011


Relying on design assumptions2 and the associated capital required to construct a facility and sustain
operations, CERI has estimated the total and annual financial commitments required for the oil sands.
Initial and sustaining capital costs, under the Realistic Scenario, are illustrated in Figure 1.4.

Figure 1.4
Initial and Sustaining Capital (2010-‐2035)
$35
New Projects
$30
Existing Projects
$25

$20

$15

$10

$5

$0
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034

Over the 25-‐year projection period, the total initial capital required for new projects is projected to be
$253 billion under the Realistic Scenario. New investment dollars start declining by 2030. This does not
reflect a slowdown in oil sands investments but instead mptions for project start
dates and announcements from the oil sands proponents; CERI does not include in its scenarios any
future projects unless publically announced by the companies involved. Ongoing investment, in the
form of sustaining capital, will take place on an annual basis.

The annual sustaining capital required for the oil sands (excluding royalty revenues, taxes, and fixed and
variable operating costs) under the Realistic projection grows from a current amount of $1 billion in
2010 to $2.9 billion by 2035. Figure 1.5 presents the sustaining capital requirements broken into two
categories: sustaining capital for existing projects and sustaining capital for new projects.3

2
CERI Study No. 122, -‐ May 2011.
3
New projects include those under construction, approved, suspended, awaiting approval, and announced.

May 2011


Figure 1.5
Sustaining Capital (2010-‐2035)
(Bln CDN$)
$3.5

$3.0

$2.5

$2.0

$1.5

$1.0

$0.5

$0.0
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034

Sustaining Capital For New Projects Sustaining Capital for Existing Projects

By 2035, natural gas requirements will increase by at least twice the current levels. The Realistic
Scenario indicates natural gas requirements of almost 4.3 BCFPD by 2035 (see Figure 1.6). Considering
how aggressively shale gas production in the US has come on stream, and the potential for shale
production in Canada, meeting the oil sands emand for natural gas appears to be a
diminishing concern. In the Realistic Scenario, Canada and the US could be engaged in an energy
exchange Canadian oil for US natural gas that further enhances the trade relationship between the
two countries. The prospects for technology switching and efficiency improvements are substantial and

May 2011


Figure 1.6
Natural Gas Requirements and Greenhouse Gas Emissions
Mmcf/d MT/y
5,000 100

4,000 80

3,000 60

2,000 40

1,000 20

0 0
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034
Gas Req-‐ments for Existing Projects
Gas Req-‐ments for New Projects
GHG Emissions

One of the by-‐products of natural gas consumption is
emissions streams, and separate the GHG emissions, the emissions are released into the atmosphere.
While technological innovation within the oil sands industry (in addition to carbon capture and storage)
is expected to help reduce these emissions, Figure 1.6 above
design assumptions. The emissions are expected to rise to 89 million tonnes per year by 2035, in tandem
with natural gas requirements. The emissions presented above reflect point source emissions and do
not take into account emissions associated with electricity purchases or the benefits of cogeneration. In
other words, these figures represent absolute GHG emissions that result from the production of
marketable bitumen and SCO from the oil sands industry.

Given the production projection as stated earlier, bitumen royalties from existing and new projects
collected by the province will be $3.2 billion in 2010 and are forecasted to grow to $47 billion by 2035
as illustrated in Figure 1.7. The cumulative total of royalties collected by the Alberta government will
exceed $623 billion over the next 25 years.

May 2011


Figure 1.7
Annual and Cumulative Royalties Collected by the Alberta Government
Existing vs. New Oil Sands Projects, 2010-‐2035
($millions)

Summary
North America has returned to positive economic growth, and oil sands developers are returning to pre-‐
recession activity levels. As the activity slowly ramps up, current trends and challenges in oil sands
development need to be considered by governments and industry. Realistic Scenario strikes a
balance between the environment and oil sands development through the inclusion of a modest
emissions compliance cost. Natural gas costs, construction, and other operating costs are estimated to
have a significant impact on oil sands developments.

Canadian crude oil supplies will continue to serve traditional markets in the US and Canada. The demand
for Canadian crude oil in the US Midwest market will grow as heavy oil refining capacity in the region is
added. However, growing volumes of Canadian bitumen supply means that new markets for these
volumes must be found. The US Gulf Coast is one such market, and the TransCanada Keystone XL
pipeline project, which is expected to be in service in 2012, will provide Canadian producers with
increased access to this market.

The growing demand for crude oil in Asia could create a new market for Canadian crude oil. The
Northern Gateway Pipeline Project from Edmonton, Alberta to the deepwater port located in Kitimat,
British Columbia is being designed to provide 525,000 BPD of diluted bitumen (dilbit) and synthetic
crude oil (SCO) export capacity. Crude oil would be shipped via this pipeline to the Pacific coast and then
loaded on tankers for delivery to the US west coast and Far East markets.

May 2011


Chapter 2
Impact of New Oil Sands Projects on
US and Canadian Economies
Introduction
Production from the oil sands is approaching the 1.7 million bbl/day mark, making those operations

Canada exports, both conventional and unconventional, almost all goes to the United States. On the
other side of the border, the US imports more oil from Canada than from any other country. The energy
ties between these two nations are therefore tight, and the oil sands in particular are increasing in
significance for both countries.

It is important to look beyond the energy industry to consider the impacts that the oil sands have
elsewhere within the Canadian and US economies. The investments made in new oil sands projects and
the monies spent on continuing operations create jobs that, in turn, generate ripple effects throughout
both of these economies. Wealth is created how much wealth and in which sectors of the economies
are two questions that arise.

This section of the report utilizes the economic tool of I/O analysis to quantify the economic impacts of
oil sands investment in the Realistic Scenario.1 Specifically, this report measures the incremental
impacts of oil sands industry development and the resulting impacts on all Canadian provinces and US
states; direct, indirect, and induced impacts of current and future investments in the oil sands industry
are observed.

Economic Impacts in Canada
Overall Economic Perspective
Table 2.1 presents the total impacts associated with both investment and operations in Alberta oil sands
over 25 years. Most of the GDP impact stays in Canada. However, 94 percent of the Canadian impact
occurs within Alberta, with the remaining 6 percent affecting the other provinces. Among those
provinces, Ontario, British Columbia, and Quebec receive the highest impact.

The cumulative sum of additional Canadian GDP from 2010 to 2035, as a result of new oil sands projects,
is estimated at $2,106 billion (Table 2.1). Employment in Canada (direct, indirect, induced) as a result of
new oil sands investments is expected to grow from 75,000 jobs in 2010 to 905,000 jobs in 2035 (see
Figure 2.5). This figure consists of part-‐time and full-‐time jobs and includes new jobs and preserved
jobs. Employees will earn approximately $25 billion a year and will spend a fraction of their income on
goods and services that will be produced in Canada. The new demand for goods and services is
accounted for in Table 2.1 by induced effect.

1
CERI Study No. 122, an Oil Sands Supply Costs and Development Projects (2010-‐ May 2011.

May 2011


Table 2.1
Economic Impact of Oil Sands in Alberta, 2010-‐2035 Investments and Operation
Thousand
$Million Person Years
Investments and Operation
GDP Compensation of Employment
Employees
Alberta 1,989,565
555,387
10,041
British Columbia 28,481
15,710
420

Manitoba 4,422
2,386
68

New Brunswick 846
415
12

Newfoundland & Labrador 368
130
4

Northwest Territories 150
73
2

Nova Scotia 857
439
12

Nunavut 28
17
0

Ontario 62,921
36,265
858

Prince Edward Island 64
35
1

Quebec 13,845
7,746
208

Saskatchewan 4,855
2,106
58

Yukon Territory 39
24
1

Gabd* 0
0
0

Total Canada 2,106,443
620,733
11,685

*Gabd is short for Government Abroad (Canadian embassies, consulates, etc.)

The impacts shown in Table 2.1 have been calculated by applying the multipliers presented in Table 2.4
to the total direct outlay (including initial and sustaining) of $2,079 billion ($283 billion investments and
$1,796 operations) during the investment and operating phases of the oil sands projects.

Relative GDP impacts by province and territory are also illustrated in Figure 2.1 on p. 13 the provinces
with the largest impacts being depicted in the strongest colours. Outside of Alberta, the provinces of
Ontario, British Columbia, and Quebec experience the greatest economic impacts, being heavily
industrialized with large populations.

Table 2.2 addresses the economic impacts (direct, indirect and induced) of oil sands investments, while
Table 2.3 describes the corresponding impacts of oil sands operations. In general, investment impacts
are more intense than operations impacts (more jobs, higher spending rates, etc.), but the duration of
the investment period is much shorter than the duration of the operating period.

May 2011


Table 2.2
Economic Impact of Oil Sands in Alberta, 2010-‐2035 Investments
Thousand Person
$Million Years
Investments
GDP Compensation of Employment
Employees
Alberta 210,795
80,548 1,592
British Columbia 5,136
2,820
74

Manitoba 936
497
14

New Brunswick 169
80
2

Newfoundland & Labrador 68
22
1

Northwest Territories 28
14
0

Nova Scotia 163
84
2

Nunavut 4
2
0

Ontario 10,086
5,924
140

Prince Edward Island 12
7
0

Quebec 2,421
1,381
37

Saskatchewan 1,239
536
15

Yukon Territory 6
4
0

Gabd* 0
0
0

Total Canada 231,064
91,919
1,877

*Gabd is short for Government Abroad (Canadian embassies, consulates, etc.)

May 2011

It's not just about Alberta: Oilsands generate thousands of jobs, billions in taxes across continent

It's not just about Alberta: Oilsands generate thousands of jobs, billions in taxes across continent

Recommended

Recommended

More Related Content

What's hot

What's hot (18)

Viewers also liked

Viewers also liked (8)

Similar to It's not just about Alberta: Oilsands generate thousands of jobs, billions in taxes across continent

Similar to It's not just about Alberta: Oilsands generate thousands of jobs, billions in taxes across continent (20)

More from Ports-To-Plains Blog

More from Ports-To-Plains Blog (20)

Recently uploaded

Recently uploaded (20)

It's not just about Alberta: Oilsands generate thousands of jobs, billions in taxes across continent